Issues: Oil & Energy

Chapter 1
Saving 2.5 Million Barrels of Oil a Day by 2015

America's oil dependence endangers our national security, our economy, and our environment. America consumes a quarter of the world's total oil, but has less than 3 percent of its known reserves. We already import almost 60 percent of our oil, making us dangerously dependent on a precarious energy source to keep our economy moving. According to the Energy Information Administration, business as usual would lead to significant growth in U.S. consumption over the next two decades, forcing us to rely on imports for nearly 70 percent of our oil by 2025, and increasing our dependence on some of the most unstable regions in the world.²

A safer, more secure energy future is well within our reach. Technologies exist today that can reduce wasteful use of oil in vehicles, industry, and buildings, delivering savings of more than 3 million barrels per day by 2015 -- more oil than we currently import from the Persian Gulf each day. And by 2025, the United States could save at least 11 million barrels of oil per day, cutting our demand by 40 percent. We can reach these goals while enhancing the competitiveness of U.S. automakers and farmers by increasing efficiency standards for cars and trucks and by using tax incentives for biofuels and efficient vehicles to give new life to our factories and farms. Smart energy policies can reduce America's dependence on oil, stimulate our domestic economy, and help keep our nation safe.

To make this a national imperative, Congress should pass legislation requiring the country to cut oil use by at least 2.5 million barrels of oil a day by 2015 and 10 million barrels per day by 2025. These goals would not stretch to our full potential, but they would represent a very promising start. Industry leaders who remain tied to business as usual will claim that we can not achieve cuts of this size. But we can readily do it with the right investments in existing automobile technology, fuel economy, and alternative fuels. With a mandate from Congress to reduce our oil dependence, America can do the following:

Increase oil savings from our cars and trucks by raising fuel economy standards.

The single most important action the administration can take to reduce our country's oil dependence is to raise federal fuel economy standards. The Department of Transportation should ramp up standards for the combined fleet of cars and light trucks in incremental steps to 40 mpg by 2015 and 55 mpg in 2025. Automakers can reach 40 mpg with improvements in conventional gasoline technology, and they can reach 55 mpg with expanded production of gasoline-electric hybrids. Indeed, America has already proven that such strides are possible. Fuel economy for new passenger cars nearly doubled between 1975 -- when standards were first adopted -- and their peak in 1988, while fuel economy for new light trucks increased by 50 percent. But the rules for passenger cars haven't changed since 1985, and the average mileage of our new cars and trucks today is at its lowest level in 20 years.

American ingenuity must once again be applied to making our vehicles more efficient. Raising fuel economy standards would save nearly 1.6 billion barrels of oil by 2015. Oil savings would keep growing as fuel economy standards continue to rise and new vehicles replace old ones. By 2025, oil savings would reach 4.9 million barrels per day -- almost twice as much as we currently import from the Persian Gulf.

These fuel economy standards would also bring huge reductions in global warming pollution. By 2025, the pollution reduction they could achieve compared with business-as-usual would be more than 660 million metric tons of carbon dioxide emissions, reducing global warming pollution from passenger vehicles in that year by 35 percent.

Enable manufacturers to ramp up production of hybrids and other fuel-efficient vehicles by offering tax credits for retooling factories.

As oil prices have risen, so has the demand for fuel-efficient cars and trucks, especially hybrids. But the "Big Three" automakers, General Motors, Ford, and DaimlerChrysler, have been slow to get into the hybrid market. As a result, they are losing the race for market share in clean and efficient vehicles and failing to improve their fleets' overall fuel economy. A recent study by the University of Michigan found that unless U.S. automakers move faster to build hybrids, thousands of jobs could be lost.³ And if they continue their business-as-usual stance, the Big Three will face a significant competitive disadvantage in the global auto market over the next few decades.⁴ Putting American innovation to work can reverse this course, saving jobs and saving oil.

Producing fuel-efficient, advanced-technology vehicles will require automakers and their suppliers to retool their factories. Hybrid vehicles rely on advanced equipment such as battery packs, electric motors and generators, and electronic power controllers -- components that currently come from factories in Japan and Europe. Tax credits would help manufacturers make capital investments necessary to retool their factories, increase the cost-effectiveness of advanced technologies, and stimulate job growth in the production of cleaner, more efficient vehicles. NRDC recommends that Congress provide a total of $3 billion over the next five to 10 years in consumer and manufacturer tax credits to spur these changes. These tax credits will not only help reduce oil dependence but will also pay for themselves through increased tax revenue from new economic activity, including new jobs in the production of high-efficiency vehicles.⁵

Figure 2

Make biofuels cost-competitive with gasoline and diesel by investing about $2 billion over 10 years in research, development, demonstration, and deployment.

The United States does not have to rely so heavily on oil to drive our economy and maintain our quality of life. We can replace much of our oil with biofuels -- fuels made from plant materials grown by American farmers. These fuels, especially those known as cellulosic biofuels, can be cost-competitive with gasoline and diesel, and allow us to invest our energy dollars at home. They can also slash global warming emissions, improve air quality, reduce soil erosion, and expand wildlife habitat. In combination with efficiency improvements and smart growth policies:

• By 2025, producing the crops to make biofuels could provide farmers with profits of more than $5 billion per year.
  
  
• Biofuels could be cheaper than gasoline and diesel, saving Americans about $20 billion per year on fuel costs by 2050.
  
  
• Biofuels could reduce U.S. greenhouse gas emissions by 1.7 billion tons per year by 2050 -- equal to more than 80 percent of transportation-related emissions and 22 percent of total emissions in 2002.
  

The biofuel feedstock with the potential to displace the largest amount of oil is cellulosic biomass, which includes agricultural residue -- the leaves, stems, and stalks of plants, dedicated energy crops, and the biomass portion of the municipal waste stream. Making fuel from cellulosic biomass offers numerous advantages. The technology for converting cellulose to biofuels is expected to be cost-competitive with petroleum-based fuels when it is mature. Cellulosic biomass crops, such as switchgrass, have the potential to produce more biomass per acre than almost any other crop. Switchgrass also requires lower inputs of energy, fertilizer, pesticide, and herbicide, and is accompanied by less erosion and improved soil fertility compared with traditional row crops.

Gasoline blended with low levels of ethanol creates air pollution problems in today's on-road cars. But vehicles running on higher biofuel blends are cleaner, since the biofuels contain no sulfur, produce low carbon monoxide, particulate, and toxic emissions, and avoid more than a ton of greenhouse gas emissions for every ton of biomass used to make biofuels. To expand the market for higher biofuel blends, NRDC recommends requiring that at least half of all new cars and trucks to be capable of operating both on gas and on biofuels or other nonpetroleum fuels by 2012. With the right policies in place, biofuels could contribute the equivalent of 7.9 million barrels of oil per day by 2050, or 53 percent of our current demand in the transportation sector.⁶

Enhance the efficiency of all vehicles by requiring better replacement tires, motor oil, and trucking practices.

Several common-sense solutions exist right now that would improve fuel economy in the cars and trucks on our roads today. Manufacturers simply need incentives to make these solutions more readily available to consumers. By pressing manufactures to upgrade the quality of replacement tires to match the quality of original equipment tires, the United States would save 7.3 billion barrels of oil over the next 50 years -- or 35 percent more than the total amount of oil that is likely to be available from the Arctic National Wildlife Refuge over the same time period. Like better replacement tires, more efficient motor oil can provide fuel savings as well. According to the U.S. Department of Energy, the use of specifically formulated low-friction motor oil can increase fuel economy by 1 percent to 2 percent.⁷ A producer of synthetic motor oil has projected that fuel economy benefits could be as much as 5 percent.⁸

Heavy-duty trucks would also benefit from efficiency standards. These trucks account for roughly 20 percent of transportation energy use but do not have to follow any standards for fuel efficiency. The American Council for an Energy-Efficient Economy has found that we could improve the fuel efficiency of trucks by up to 70 percent with cost-effective measures. The heaviest long-range trucks can increase fuel economy through conventional technology, including enhancing aerodynamics, lowering rolling resistance in tires, improving engine fuel injection and thermal management, and reducing vehicle weight. Medium-size, short-haul trucks can also achieve large fuel economy advances through hybrid gasoline-electric or diesel-electric drivetrains. And we can further stretch the fuel efficiency of heavy trucks and reap air quality benefits by reducing the tremendous amount of fuel used during idling.

Expand efficiency programs that help reduce industrial and residential oil use.

Approximately one-third of U.S. oil demand is consumed in industrial manufacturing plants, residential buildings, and airplanes. By making efficiency gains in these areas, we can save more than 300,000 barrels per day in 2015, or 12 percent of our national target of 2.5 million barrels per day in savings. To achieve these oil savings, we should expand industrial efficiency programs. Improving the efficiency of industrial boilers and process heating alone can reduce oil consumption by 15 percent by 2020.

The manufacture of chemicals and industrial materials consumes four times the amount of oil used for heating. But the industrial sector can cut oil use by replacing petroleum-based feedstocks with materials derived from crops, which are already used to produce solvents, pharmaceuticals, adhesives, detergents, inks, paints, plastics, and other products.

Today, approximately 8 million homes continue to burn fuel oil, liquefied petroleum gases, propane, or kerosene for space and water heating. The United States should promote residential oil savings by adopting stringent efficiency standards for house and apartment building boilers and furnaces, adopting performance-based tax incentives for home retrofits and for efficient water heaters, and updating codes for new buildings. Together these measures could save 100,000 barrels of oil per day in 2015.

Encourage smart growth instead of suburban sprawl.

Thanks to suburban sprawl, Americans' vehicle use has more than tripled in the last three decades. People are logging more miles and using more gasoline just to do their daily activities. Smart-growth communities -- ones that offer walkable neighborhoods, housing near jobs, and public transportation -- can help residents save gas and time behind the wheel. Environmental Protection Agency research shows that residents of a smart-growth development in Atlanta use half the transportation energy of those in a typical sprawling development. Building better communities holds immense potential for generating oil savings. If all new construction over the next 10 years were built in a similar fashion to existing smart-growth developments, the nation could achieve oil savings of more than half a million barrels of oil per day.

Congress has taken initial steps to support smart growth and better transportation choices, but much more must be done. To achieve greater oil savings and pollution reductions, the federal government should take these additional steps:

• Require Freddie Mac and Fannie Mae to offer Location Efficient Mortgages throughout the country to reward those who build and buy homes located near public transit, and to offer dollar-for-dollar trade-offs between lower transportation costs and higher housing costs.
  
  
• Promote commuter choice with a tax-free benefit for employees who carpool, use transit, bike to work, or telecommute comparable to that provided in the form of free parking.
  
  
• Cut the red tape and streamline financing for public transportation projects that significantly increase mobility of commuters and other public-transportation-dependent populations and promote economic development in urban "transit-oriented development zones."
  
  
• Promote economic development in areas with existing access to mass transit through urban "transit-oriented development zones."
  
  
• Direct federal agencies to revise their planning models so that they account for the financial and air quality benefits of smart growth.
  

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Notes

2. Energy Information Administration, Annual Energy Outlook 2004: With Projections to 2025, DOE/EIA-0383(2004), Table 21, January 2004.

3. Patrick Hammet, , Michael Flynn, Maitreya Kathleen Sims, and Daniel Luria, Fuel-Saving Technologies and Facility Conversion: Costs, Benefits, and Incentives, A report to the National Commission on Energy Policy and the Michigan Environmental Council, University of Michigan Transportation Research Institute, November 2004.

4. Duncan Austin, Niki Rosinski, Amanda Sauer, Colin Le Duc, Changing Drivers, World Resources Institute, Sustainable Asset Management (SAM), 2003.

5. National Commission on Energy Policy, Ending the Energy Stalemate: A Bipartisan Strategy to Meet America's Energy Challenges, December 2004.

6. See NRDC, Growing Energy: How Biofuels Can Help End America's Oil Dependence, December 2004.

7. U.S. Department of Energy, "Gas Mileage Tips: Keeping Your Car in Shape," available on the fuel economy website: www.fueleconomy.gov/feg/maintain.shtml, Viewed August 23, 2004.

8. AMSOIL INC, "The Right Environmental Choice," product brochure for 100 percent synthetic oil, Superior, WI, 2003.